In other words, orders are organized in the book according to price from highest to lowest for the bid prices and from lowest to highest on the ask side. All new limit order strategies that are submitted to the stock exchange will go into the order book and get sorted out according to this logic. For example, if a trader submits a limit order to buy shares of Facebook FB at Since there are no other orders on the book the limit order will go up to the top of the book on the bid size. The central limit order book will look something like in the figure below:.

Because this is a sell order forex is going to go to the Ask side of the order book. Since the order book matches the best bid price but arranged on a time priority too, it means this fourth-order will go on Level 2.

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In this case, the order O will be moved down, and then order O will replace O on the book. You can see how the order O was pushed down and replaced by O, due to the price-time priority. The order O will be pushed down and replaced by the new order O, which is now sitting at the top of the book. If you really wanted to buy some shares of FB stock you would be able to purchase because there is enough liquidity.

In other words, there is a willing seller ready to take the other side of your transaction. The reason why we can purchase FB stocks is that there are people who have put limit orders on the order book. The liquidity allows buyers and sellers to trade in that market. The top of the book is a key part of the order book because it shows you the highest bid or the best bid and the lowest ask price or the best asks. There is a situation that happens quite often with the order book, namely canceling orders.

This is something known as spoofing the limit order book. What is spoofing? In simple terms, spoofing is the process of submitting large sell or buys limit orders added on the order book but with no intention to want to get filled on that particular order.

The purpose of spoofing is to manipulate the market price and create a false depiction of liquidity in the market. By doing this, the smart money is trying to manipulate one side of the order book buy side or sell side and convince other market participants to join the market on the same side. However, once enough traders bite the bullet, the large order gets canceled and never gets filled; but instead, the smart money is switching sides and go on the opposite side of the initial limit order.

To spoof the market, the big player needs to create a false impression of a major seller order coming into the market. This will mislead other traders and high-frequency robots to believe there is a real interest to the downside. Once other market participants join in the market and sell, the price will start dropping.

Your job is to train your eyes to spot this kind of spoofing activity and take advantage of it. In summary, the limit order book can be used as an additional trading tool in your trading toolkit. Most successful short-term traders in the world use order book trading. We specialize in teaching traders of all skill levels how to trade stocks, options, forex, cryptocurrencies, commodities, and more.

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Our mission is to address the lack of good information for market traders and to simplify trading education by giving readers a detailed plan with step-by-step rules to follow. Forex Trading for Beginners. He breaks down different strategies for use in a wide range of markets in a way that is easy to comprehend and follow no matter your level of investing experience. The book is also popular for those looking into how day trading psychology works, and it is extremely relatable by providing real-life examples to illustrate its points. Markus Heitkotter helps break trading strategy down in an easy-to-understand format.

His book is widely touted as the top book for those looking for information on day trading in forex and options. Its praise is well earned, as you will be given detailed and clear instructions about the various entry and exit rules you should follow. He also advises his readers on small intraday trading and software programs that are essential to giving you the best chance of success. The light-hearted and reader-engaging format makes it easy to read as well as enjoyable. He delves deeply into more complex strategies such as scalping struggle, and discusses how it can be utilized to overcome high intraday fees and costs.

He also focuses on range trading, which is an alternative strategy that can lead to more successful day trading. He breaks down these complex systems and puts them into easy-to-follow language that makes it more accessible for various levels of traders. For traders looking for more well-rounded books that delve into everything from strategies to risk management to planning, below are some of the most popular books on the whole day trading process. Marcel Link centers his work on the premise of making trades in situations where the odds are in your favor.

You will be provided with a detailed guide on what to look for, what to trade, for how much, and exactly how to set up each trade. The author plays off of his years of extensive experience navigating the market through the use of a trial-and-error approach. He uses his successes and failures, delivered to the reader candidly, to help you avoid missteps that he made, and to achieve a successful day trading experience.

If you are looking for a book that provides you with a get-rich scheme, then keep on browsing. He instructs you not only on all of the potential dangers that you may encounter, but also provides you with actionable advice on how to manage or mitigate them. This book is good for both beginners and more experienced traders, as it is easy to follow and leaves out much of the fluff and fanfare that other books may include.

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No word is wasted, and at the conclusion, you will have a better understanding of the day trading process, market philosophy, and even day trading psychology. The book is packed with useful tips and advice in the form of interviews from successful and experienced day traders. Author Kathy Lien takes a more technical focus to day trading, providing readers with insight in how to conduct an accurate and effective analysis of the market, and using that analysis to manage your trade decisions.

The author is more than qualified as she is one of the most highly experienced and widely recognized analysts in the forex realm. You are likely to have seen her on either CNN or Bloomberg. She also provides you with her own trade ideas. This is definitely one of the top forex books. Here are some that we believe are comprehensive and easy to understand.

Best Day Trading Books

This book is a must-read because of how easy it is to apply the strategies the author describes in the book. He gives a number of detailed strategies that cover entry and exit points, patterns to identify, and charts to use as well as other indicators. In this book, Douglas focuses on the psychology of trading, and the steps you need to take to think like a great trader. Trading requires mental toughness, and in this book, Douglas delves into the mindset of a trader, teaches you how to gain confidence, and shares how you can take responsibility for your failures.

Your emotions can get in the way of your ability to think objectively, causing you to lose money.